Business cycle review: 2008 to present day

Following the global financial crisis, spare capacity in the global economy has persisted much longer than in past expansions despite extremely accommodative monetary policy settings in advanced economies. New Zealand has not been immune to these developments – GDP growth here has also been more subdued than in typical expansions, in large part due to weakness and uncertainty abroad. Against this international and domestic backdrop, consumer price inflation in New Zealand has been low, and lower than the Reserve Bank of New Zealand and other forecasters initially anticipated – particularly since 2014.

This article summarises developments in the New Zealand economy since 2008 through the lens of monetary policy, and identifies five key phases. A subsequent article will present some of the key features of this cycle, and the insights for monetary policy that have emerged or been reinforced.